Coughlan v Abernethy HC Auckland CIV 2009-004-2374 [2010] NZHC 2180 (20 October 2010)

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Introduction [1] Factual background [3] Tribunal decision [9] The appeal and cross appeal [21] Approach to appeal [25] Duty of care [31] Voluntary assumption of risk [42] Liability of Mr Coughlan [51] Mr Humphrey’s liability [74] The cross-appeal [86] Were Messrs Coughlan and Humphrey developers? [88] Apportionment [89] Remedial costs [101] Mitigation and contributory negligence [106] General damages [114] Result [121]

Richard Coughlan and Trevor Humphrey (Messrs Coughlan and Humphrey) challenge on some eight grounds of law and fact the decision of the Weathertight Homes Tribunal holding them jointly and severally liable to pay Vanessa and Alan Abernethy (the Abernethys) damages of $60,310.86 in respect of the Abernethys’ “leaky home”. The Abernethys cross-appeal challenging the Tribunal decision on some five grounds of law and fact.

[2] Following the hearing of the appeal on 4 May 2010, the parties filed an agreed chronology and separate supplementary memoranda relating to a chronology of mitigation carried out by the Abernethys. Counsel for the Abernethys also filed a

memorandum dated 16 June 2010 drawing the Court’s attention to the supplementary judgment of the Court of Appeal in Byron Avenue1 relating to the awards of general damages for the leaky homes in that case.

[3] In 1994 Stockdale Investments Auckland Limited (Stockdale), a company owned at material times by Messrs Coughlan and Humphrey, obtained consent from the North Shore City Council to build a house on a property at 5/6 City View Terrace, Birkenhead, Auckland. Mr Coughlan designed the house and Mr Humphrey administered the project. When the house was completed in December 1994, the Council issued a code compliance certificate. Stockdale sold the property to a Korean family who occupied it for some nine years until they resold it to the Abernethys in 2003.

[4] The original agreement for sale and purchase of the property for $446,000 dated 27 July 2003 was conditional on the Abernethys receiving a satisfactory building report from Futuresafe Building Inspections Limited. Mr Beazley, an employee of Futuresafe Building Inspections Limited, inspected the property and prepared two reports identifying a number of defects which he considered had arisen largely because the property had not been properly maintained and which were estimated to cost around $10,000 to remedy. On the basis of Mr Beazley’s reports, the Abernethys negotiated a $3,000 reduction in the purchase price and settlement took place in September 2003. The Abernethys arranged for the repairs recommended by Mr Beazley to be carried out.

[5] After noticing a new problem, bubbling paint inside near the front door, the Abernethys lodged a claim with the Weathertight Homes Resolution Service in late October 2003. The Weathertight Homes Resolution Service assessor, Mr Alan Light, carried out two investigations of the property. In his first report dated 28 July 2004, Mr Light found that the Abernethys’ claim was eligible as a “leaky building” and estimated the cost of repair work at $10,597.50 over and above what the Abernethys had already spent doing the repairs recommended by

1 Byron Avenue [2010] NZCA 234. Leave to appeal has been granted: Byron Avenue [2010] NZSC

Mr Beazley. Although the Abernethys lived in the house on the property until January 2005 when they left for Dubai and rented the property out, the work recommended by Mr Light was not carried out.

[6] In Mr Light’s second report dated 21 June 2007 he estimated the costs of remediation at $115,500.23.

[7] On 17 March 2009 the Abernethys filed a statement of claim with the Weathertight Homes Tribunal seeking damages for negligence of $334,846.10 (including GST), comprising $201,568.06 for repair costs, $39,100 for professional fees, $32,225 for consequential losses, $3,953.04 for costs incurred mitigating loss and $60,000 for general damages. The claim was against Mr Coughlan as designer, Mr Humphrey as project manager, the North Shore City Council, Stockdale as developer and Mr Beazley. The claim listed the following defects:

1 July and supplementary written submissions on 8 and 9 July 2009. Shortly after the hearing started the claim against the Council was settled for $90,000.

[9] The Tribunal’s decision was issued on 12 February 2010. After summarising the factual background and the expert evidence relating to the defects in the house, the Tribunal concluded:

[53] Having regard to the experts’ evidence, the major causes of water ingress and damage are lack of sub-floor ventilation; lack of a vertical control joint to exterior cladding at the back of the building, direct contact of the cladding with the deck stringer combined with inadequate drainage at the back of the building; inadequate installation of the window at the front of the east wall at the entrance; and the flat topped timber capping to the deck barrier walls or balustrades especially at the south front of the building.

[10] On the question of the reasonable cost of repairs, the Tribunal accepted as a matter of commercial reality that the Abernethys would have to pay a total of

$201,568.06 to effect remediation and that there should therefore be no deduction for betterment. The Tribunal also accepted that the $39,100 claimed for professional fees was reasonable.

[11] After considering the relevant evidence, the Tribunal decided that Mr Coughlan had been negligent as architectural designer in leaving vents out of the drawings when they should have been included and in omitting any reference to the manufacturer’s instructions on the plans, but not in any other respects. The Tribunal did not accept that Mr Coughlan was negligent as project manager or as a developer. In summary the Tribunal found Mr Coughlan as the designer jointly and severally liable to the Abernethys in the sum of $60,310.86.

[12] After considering the relevant evidence and after taking into account the decision in Body Corporate 185960 v North Shore City Council,2 the Tribunal decided that Mr Humphrey was liable as project manager. The Tribunal said:

2 Body Corporate 185960 v North Shore City Council HC Auckland CIV-2006-404-3535,

[109] Based on that principle, I find that as the project manager or administrator Mr Humphrey was responsible for supervising workmanship unless someone else was appointed to that role. This position went beyond his role as a director of the company (just as Mr Coughlan’s position as designer went beyond his role as a director.) I do not consider that the fact Mr Humphrey worked part-time as project manager is sufficient to conclude that he did not owe a duty of care in that capacity. Accordingly I find that Mr Humphrey was in breach of his duty of care as project manager in not taking steps as project manager to ensure the workmanship on site was adequate.

The Tribunal did not accept that Mr Humphrey was liable as a developer. In summary the Tribunal found Mr Humphrey as the project manager jointly and severally liable to the Abernethys in the sum of $60,310.86.

[13] The Tribunal accepted that Stockdale was the developer and was responsible for the leaks and damage which arose from its negligence. The Tribunal found Stockdale as the developer jointly and severally liable to the Abernethys in the sum of $60,310.86.

[14] After considering the relevant evidence, the Tribunal made the following findings in relation to Mr Beazley:

[135] I find that Mr Beazley was negligent in not identifying the lack of ventilation holes in the base of the building, but I do not find that there was a widespread failure on his part in the discharge of his duty to the claimants as they allege. I do not find that his conclusion that these were maintenance issues was a negligent failure – there was a widespread lack of maintenance and neglect – or a negligent misstatement or a breach of the Fair Trading Act on his part. On balance I do not accept that Mr Beazley was negligent as a pre-purchase inspector in his advice to Mr and Mrs Abernethy, given his brief and the limitation of not doing invasive testing, except for his failure to identify the lack of ventilation to the under floor space.

[136] Mr Beazley’s liability relates to that failure. Even that is mitigated to a degree by his belief that he was unable to remove interior panels to inspect the joists.

[137] In summary I find Mr Beazley as pre-purchase inspector jointly and severally liable to the claimants for the limited amount only of $9,046.63, as set out in paragraphs 32 to 58, this section, and paragraph 138 onwards including 183/IV, arising from and limited to his failure to identify one important defect, the absence of vents, which could have been remedied in isolation.

[15] The Tribunal then turned to consider how much of the cost of repairs was “compensable”. The Tribunal did not consider that all the defects were the result of negligence. The Tribunal concluded that the remediation to repair parts of the

building was required because of the way the buildings were designed, approved and built at the time and that negligence was only part of the reason. The Tribunal then considered the walls of the property and concluded that the costs of repairing the north and east walls should be compensated for, but that the costs of repairing the south and west walls should not be included. On the basis of the quantity surveyor evidence, the Tribunal then decided that the compensatable proportions of the

$240,668.06 for repairs and professional fees should be 35 per cent (north wall) plus

[16] Turning then to the question of other damages, the Tribunal accepted the figure of $30,225 for consequential losses (reduced or lost rental income including lost rent while repairs were being carried out), but did not accept that a figure of

$60,000 for general damages was reasonable because the Abernethys had not lived in the house for over four and a half of the six years since they bought it in September 2003. For this reason the Tribunal reduced the claim for general damages to $7,500 for Mrs Abernethy, who had borne the major share of the burden, and

$5,000 for Mr Abernethy. The Tribunal accepted the claim for $3,953.04 for costs incurred in mitigating the loss. On this basis the overall claim was reduced to

[17] On the question of contributory negligence and failure to adequately mitigate loss by the Abernethys, the Tribunal found that there was an element of contributory negligence in that they knew that the building was built of risky materials; that it had been badly neglected by the vendors; and that it was likely moisture had already penetrated the building envelope. The Tribunal said:

[164] It was not Mr and Mrs Abernethy’s fault that the building was in such a poor condition when they bought it, but nor was that the respondents’ fault either. Mr and Mrs Abernethy did take a calculated risk that such a building would not turn out to be leaky.

[165] For those reasons, notwithstanding that the precautions and steps they took were reasonable, Mr and Mrs Abernethy must share in the above costs of its having turned out to be a ‘bad buy’. They should not be penalised for having obtained pre-purchase reports; but neither does their having done so absolve them from having to take some responsibility for their decision to purchase this townhouse. I find Mr and Mrs Abernethy were also negligent, for those reasons.

[18] Taking into account the Abernethys’ failure to mitigate their losses by immediately taking steps to have ventilation installed and sheeting laid over the ground in the sub-floor area after the first Weathertight Home Resolution Service report was received and deciding to live abroad in January 2005 when the problems with the house that Mr Light had identified in July 2004 were still unresolved, the Tribunal decided that the figure of $167,012.07 should be reduced by 10 per cent giving a final figure of $150,310.86.

[19] The Tribunal next considered the impact on the claim of the settlement with the Council for $90,000 and decided that that amount needed to be deducted from the claim, leaving $60,310.86 still to be recovered. On the question of apportionment of damages, the Tribunal decided, after considering the provisions of s 17 of the Law Reform Act 1936 and after taking into account the fact that the Council took a commercial risk in settling with the claimants, that it would not be fair on the other liable parties for there to be some apportionment of the liability of the Council with the other parties. The Tribunal then concluded:

[181] Having regard to all the evidence, I consider that Stockdale as developer bears the greatest responsibility for the losses, and Mr Coughlan as the designer and Mr Humphrey as the project manager bear a greater share of the responsibility than Mr Beazley as pre-purchase inspector. A fair and equitable apportionment is – Stockdale 45%, Mr Coughlan 20% and Mr Humphrey 20%. Mr Beazley’s share is 15%.

I. Richard Coughlan is ordered to pay Vanessa Abernethy and Alan Abernethy the sum of $60,310.86 within 30 days of the date of this determination. Richard Coughlan is entitled to recover a contribution of up to $48,248.69 from Trevor Humphrey and Stockdale Investments Auckland Liminted including up to $9,046.63 from

II. Trevor Humphrey is ordered to pay Vanessa Abernethy and Alan Abernethy the sum of $60,310.86 within 30 days of the date of this determination. Trevor Humphrey is entitled to recover a contribution of up to $48,248.69 from Richard Coughlan and Stockdale Investments Auckland Limited including up to $9,046.63 from Cedric Beazley, for any amount Mr Humphrey pays in excess of $12,062.17.

III. Stockdale Investments Auckland Limited is ordered to pay Vanessa Abernethy and Alan Abernethy the sum of $60,310.86 within 30 days of the date of this determination. Stockdale Investments Auckland Limited is entitled to recover a contribution of up to $33,170.97 from Richard Coughlan and Trevor Humphrey including up to $9,046.63 from Cedric Beazley, for any amount Stockdale pays in excess of

IV. Cedric Beazley is ordered to pay Vanessa Abernethy and Alan Abernethy the sum of $9,046.63 within 40 days of the date of this determination.

V. To summarise the decision, and without limiting I to IV above, if the four respondents meet their obligations under this determination, this will result in the following payments being made by the respondents to the claimants, and I so order:

Richard Couglan, first respondent	$12,062.17
Trevor Humphrey, second respondent	$12,062.17
Stockdale Investments Auckland Limited, fourth respondent	$27,139.89
Cedric Beazley, fifth respondent	$ 9,046.63

VI. As regards the summary in order V immediately above, I order that if Stockdale Investments Auckland Limited cannot pay, and without limiting I to IV above, the payments to the claimants are to be

[21] Messrs Coughlan and Humphrey appealed against the Tribunal’s decision initially to the District Court, but on the application of the Abernethys the appeal was subsequently transferred by consent to this Court: see minute of Allan J dated

b) impose a duty on Mr Humphrey to supervise and control the work of the independent contractors who constructed the unit given his finding that Stockdale delegated responsibility for the quality of the work to the contractors and Mr Humphrey was not engaged as a site manager and did not undertake any responsibility for the quality of the work;

c) find that the lack of sub-floor ventilation was as a result of a breach of Mr Coughlan’s duty of care given blocklayer incorporated sub-floor ventilation in the other two units of the development;

e) find that the lack of any reference to control joints in the plans and specifications prepared by Mr Coughlan was a breach of the duty of care he owed to the Abernethys or that this omission was a material cause of damage to the walls of the unit;

f) find that Messrs Coughlan and Humphrey were responsible for the leaks occurring around the windows or that their conduct in this regard was a material cause of damage to the walls of the unit;

g) reject the submission for Messrs Coughlan and Humphrey that causation was to be determined in accordance with the principles set out in Gray v Tulip Holdings Limited;4 and

h) find that the Abernethys’ contribution to the loss they suffered was only 10 per cent.

4 Gray v Tulip Holdings Limited Weathertight Homes Tribunal Claim No 499, 30 June 2006.

a) in finding that Messrs Coughlan and Humphrey were not developers of the property;

b) not taking into account the North Shore City Council when apportioning damages between the parties;

c) in finding that Messrs Coughlan and Humphrey, the Council, Stockdale and Mr Beazley were responsible only for the cost of repairing the north and east walls;

d) in finding the Abernethys contributed to the loss they suffered and in reducing the quantum of damages by 10 per cent when they took adequate precautions before purchasing the property, relied on the expert advice they received and at all times acted reasonably in their own interests; and

$5,000 to Mr Abernethy when these awards for general damages are not in line with the prevailing law and did not adequately reflect the burden of coping with the distress they experienced.

[24] In the written submissions for the parties and at the hearing of the appeal, counsel divided their arguments into the following parts: the question of the impact of the Abernethys’ knowledge on the appellants’ duty of care; issues arising from the claim against Mr Coughlan; issues arising from the claim against Mr Humphrey; contributory negligence by the Abernethys; and quantum of damages issues, including apportionment.

A party to a claim that has been determined by the Tribunal may appeal on a question of law or fact that arises from the determination.

On an appeal the High Court has power to confirm, modify, or reverse the determination or any part of it and may exercise any of the powers that could have been exercised by the Tribunal in relation to the claim to which the appeal relates: s 95(1).

[26] The appeal is to be determined in accordance with Part 20 of the High Court Rules: cf Hartley v Balemi.5 Rule 20.18 provides that the appeal is by way of rehearing. This means that the well-established approach to general appeals in Austin, Nichols & Co Inc v Stichting Lodestar,6 as confirmed in K v B,7 applies to appeals under s 93 of the Weathertight Homes Resolution Services Act 2006: Burns v Argon Construction Ltd,8 Boyd v McGregor9 and Chee v Star East Investment Ltd.10 The principles that may be derived from Austin, Nichols are set out at [4] and [5] and may be summarised as follows:

a) The appellant bears an onus of satisfying the appeal court that it should differ from the decision under appeal. It is only if the appellate court considers that the appealed decision is wrong that it is justified in interfering with it.

b) The appeal court may or may not find the reasoning of the Tribunal persuasive in its own terms. The Tribunal may have had a particular advantage (such as technical expertise or the opportunity to assess the credibility of witnesses, where such assessment is important).

c) The extent of the consideration an appeal court exercising a general power of appeal gives to the decision appealed from is a matter for its judgment.

5 _{Hartley v Balemi HC Auckland
CIV-2006-404-2589, 29 March 2007 at [39]–[41].}

8 _{Burns v Argon Construction Ltd HC
Auckland CIV-2008-404-7316, 18 May 2009 at [14].}

10 Chee v Star East Investment Ltd HC Auckland CIV-2009-404-5255, 1 April 2010.

[27] In confirming the approach to general appeals mandated by its decision in Austin, Nichols & Co, the Supreme Court in K v B at [32] has distinguished in this context a general appeal from an appeal against a decision made in the exercise of a discretion. For appeals against the exercise of a discretion, the criteria for a successful appeal are stricter and require: an error of law or principle; the taking account of irrelevant considerations; a failure to take account of a relevant consideration; or that the decision is plainly wrong. In an appeal of the present nature under the Weathertight Homes Resolution Services Act 2006 the aspects of the Tribunal’s decision that can be said to be “discretionary” are those relating to apportionment of damages under s 17 of the Law Reform Act 1936 and s 3 of the Contributory Negligence Act 1947 and the amount of an award of general damages:

[28] In an appeal under the Weathertight Homes Resolution Services Act 2006 it is also important to recognise that the purpose of the Act is to provide owners of leaky homes “with access to speedy, flexible and cost-effective procedures for assessment and resolution of [their] claims”: s 3. Like its predecessor, the Weathertight Homes Resolution Services Act 2002, the 2006 Act “provides a comprehensive regime for investigating, evaluating, and resolving claims”:

cf Auckland City Council v Weathertight Homes Resolution Service.12 The new Act

responded to the rise of large multi-unit claims and introduced a Tribunal to perform the adjudication functions for leaky buildings: Hartley v Balemi.13 As s 4 of the Act (the overview section) indicates, there is provision for mediation and compulsory adjudication of claims: cf Kay v Dickson Lonergan Ltd.14 Sections 13–18 prescribe eligibility criteria. There are mechanisms for homeowners to submit claims, for claims to be evaluated, and for home owners to receive assessor’s reports: ss 31-44 and Auckland City Council v Weathertight Homes Resolution Service.15 Whereas the

11 Findlay v Sandelin v Auckland City Council HC Auckland CIV-2009-404-6497, 16 September

12 Auckland City Council v Weathertight Homes Resolution Service HC Auckland CIV-2004-404-

2002 Act contained provisions for the appointment of adjudicators, the 2006 Act provides for adjudication by the Weathertight Homes Tribunal: s 60. The Tribunal has wide powers to determine the liability of parties and remedies: ss 73 and 29. Significantly, under s 73(1)(a), the Tribunal may “conduct the proceedings in any manner it thinks fit, including adopting processes that enable it to perform an investigative role”.

[29] When the purpose and scheme of the Weathertight Homes Resolution Services Act 2006 are taken into account, it is apparent that Parliament intended the Tribunal to have wide and flexible powers and that while there is a general right of appeal on questions of law or fact arising from the determinations of the Tribunal, a Court on appeal needs to recognise the specialist position of the Tribunal and the purpose of the Act to provide owners of leaky homes with access to speedy, flexible, and cost-effective procedures for assessment and resolution of their claims:

cf Hartley v Balemi.16 This reinforces the approach mandated by the Supreme Court

in Austin, Nichols & Co that an appellate court will need to be persuaded on the basis of compelling grounds that the Tribunal’s decision is wrong.

[30] I propose to consider the issues raised on this appeal on an issue by issue basis with reference to the submissions made by the parties in the context of each issue.

[31] For Messrs Coughlan and Humphrey, it was submitted that they owed no duty of care to the Abernethys because the Abernethys were aware from Mr Beazley’s pre-purchase reports, which identified the problem leading to their claim, that the house was a “leaky home” before they purchased it. In this case there was no “latent defect” and the Abernethys were “not innocent purchasers”:

cf Bowen v Paramount Builders (Hamilton) Ltd17 and Puller v The Secretary of

Education.18 It was submitted that the Tribunal failed to address this submission, which had been made to it as well.

[32] For the Abernethys, it was submitted that their knowledge did not impact on the well-established duties of care owed to subsequent owners by architects,

builders, project managers and developers. Intermediate inspection by a third party will not in most cases exculpate the original tortfeasor: Steiller v Porirua City Council.19 Mr Beazley’s pre-purchase report in this case essentially categorised the problems as deferred maintenance. The Abernethys, who were not building experts, were entitled to rely on Mr Beazley’s expertise. He estimated that the repairs would cost about $10,000. The Abernethys had no actual knowledge of the extent of the

problems. Mr Beazley’s report did not identify all of the causes of water entry and damage. Any negligence on Mr Beazley’s part could not be attributed to them: Morton v Douglas Homes Ltd.20 The Abernethys arranged for the repairs recommended by Mr Beazley, but they were not sufficient.

[33] There is little doubt that the Tribunal did find that Messrs Coughlan and Humphrey owed a duty of care to the Abernethys. In the case of Mr Humphrey there is an express finding to that effect: at [109]. In the case of Mr Coughlan there is an implicit finding by virtue of the Tribunal’s decision as to the negligence and liability of Mr Coughlan. The question on appeal is whether the Tribunal was wrong in making these findings in the circumstances of this case.

[34] It was not disputed that a house designer and a project administrator owe duties to use reasonable care to prevent damage to persons whom they should reasonably expect to be affected by their work, including subsequent purchasers, and that they will be liable to such third persons for the negligent creation of a latent or

Mount Albert Borough Council v Johnson,22 Invercargill City Council v Hamlin,23

[35] An opportunity to inspect or examine a property before purchase to discover a hidden defect will not abrogate liability for breach of the duty of care unless there is a sufficiently strong expectation of such inspection or examination. In

25 Sunset Terraces [2010] NZCA 64 at [25]- [26], [45] and [82]. Leave to appeal has been granted:

Stieller v Porirua City Council26 in the judgment of the Court of Appeal delivered by

Mr Hancock [counsel for the Council] submitted that the decided cases showed that an opportunity for intermediate examination may break the relationship of proximity upon which the liability of the local authority rests. In Dutton v Bognor Regis Urban District Council [1972] 1 QB 373, Lord Denning MR, in dealing with an argument that the duty ought to be limited to those immediately concerned and not to purchaser after purchaser down the line, said:

"There is a good deal in this, but I think the reason is because a subsequent purchaser often has the house surveyed. This intermediate inspection, or opportunity of inspection, may break the proximity. It would certainly do so when it ought to disclose the damage. But the foundations of a house are in a class by themselves. Once covered up, they will not be seen again until the damage appears. The inspector must know this or, at any rate, he ought to know it" (ibid, 396).

This lack of opportunity on the part of an occupier to inspect the premises may account for the readiness of the Courts to impose liability or set a high standard of care in respect of such items as foundations and drainage work which will, with the progress of the construction, be covered up and hidden from view. Mr Hancock submitted that in the present case the defective weather-boards remained available for inspection and that, as the Stiellers had the opportunity to examine these, there was good reason for restricting recovery to only such items in the house as would not have been reasonably apparent on a visual inspection of it; therefore no claim should lie in respect of the weather-boards. The latter, he said, were not the "building time- bomb", to use the graphic language which Lawton LJ applied in Dennis v Charnwood Borough Council [1982] 3 All ER 486, 495.

There is no reason why the Stiellers should have been expected to subject the weather-boards to a critical examination before buying the house. Mr Stieller said in evidence that on the second or third occasions he and Mrs Stieller saw the house before taking possession, it looked attractive and there was nothing about the whole structure which alerted him to the real problems which were later experienced. The weather-board cladding was on the upper storey and except for one side it was not easy to examine it. However, as a matter of law, a person who creates a dangerous situation cannot escape liability on the ground of expectation of intermediate examination unless the expectation is strong enough to justify him in regarding the contemplated inspection as an adequate safeguard to persons who might otherwise suffer harm: Bowen v Paramount Builders Ltd [1977] 1 NZLR

[36] As the decision in Stieller shows, the question whether there was a sufficiently strong expectation of intermediate inspection or examination is a question of fact in the circumstances of the particular case. In the present case there

was no suggestion of any sufficiently strong expectation on the part of Messrs Coughlan and Humphrey in 1994 that subsequent purchasers of the property, such as the Abernethys in 2003, would obtain a pre-purchase report or that any pre- purchase report that was obtained would or should have identified the problems that were subsequently discovered in the property. The absence of any such expectation in 1994 is reinforced by the decision of the Court of Appeal in Hamlin27 which was delivered in 1994. Richardson J observed that it was not the practice in New Zealand in the 1970s and 1980s for purchasers to commission pre-purchase inspections.28 While Richardson J discussed the legislative changes in the early

1990s in detail,29 the Court at no point referred to any new expectation of pre-

purchase inspections in the early 1990s. On the contrary, Casey J noted that the obtaining of surveyors’ or engineers’ reports by house purchasers “is virtually unknown in this country”.30 The Court of Appeal’s judgment was upheld by the

Privy Council31 and was approved with detailed consideration in Sunset Terraces.32

[37] The decision in Pullar v The Secretary of Education, relied on by Messrs Coughlan and Humphrey, may be distinguished as the Court there was dealing with the question of a defect for the purposes of limitation. It was held that a plaintiff may not extend limitation periods through wilful blindness.33 Not all elements of the damage need exist for the cause of action to accrue, but that did not mean that whenever a plaintiff purchases a property with some known defects and other,

[38] The question whether the pre-purchase reports which the Abernethys obtained from Mr Beazley in 2003 in fact identified the “leaky home” problems so that the defects were not hidden when the Abernethys purchased the property and they were therefore not “innocent purchasers” is a separate question. If Mr Beazley’s reports did in fact identify the problems so that there were no hidden defects when the Abernethys purchased in 2003, the question is then one of

voluntary assumption of risk (volenti non fit injuria) rather than no duty of care or no breach of duty. As pointed out in The Law of Torts in New Zealand: 34

We need to distinguish between cases involving the plaintiff’s assumption of the risk and those which on their true analysis involve no breach of the duty. The question to ask is whether the conduct would be actionable apart from the plaintiff’s alleged knowledge and acceptance of the risk. If it would not, the plaintiff’s state of mind is irrelevant and there is simply no breach of duty. If the conduct is otherwise actionable and the plaintiff knows or ought to know of the risk, the volenti doctrine or, it may be, the principles of contributory negligence come into play.

[39] The distinctions between the separate questions of duty of care, voluntary assumption of risk and contributory negligence have been recognised by the Court of Appeal in the context of leaky homes. In Sunset Terraces35 Baragwanath J, delivering the judgment of the Court, said:

34 Stephen Todd (ed) The Law of Torts in New Zealand (5th ed, Thomson Reuters, Wellington, 2009)

[82] Purchasers generally must be able to claim against those responsible for the condition of the leaky building unless they have such knowledge, or means of knowledge, as entails acceptance of its condition. The Council’s submission that any liability could only be to the original owner is untenable. It is commonly the case that the original owner knows or should know that there is deficiency in the workmanship. But that says nothing about the position of later buyers who are to be judged on what they know or should know. They may be caught by the ten year limitation under s 91. But there is no good reason to visit them with matters of which they are unaware.

[60] But there is need to examine the extent of the right of general reliance. I agree with the Judge that, in the period prior to issue of a code compliance certificate, failure to seek a LIM which would have disclosed problems or alternatively to make other enquiry of the Council goes to contributory negligence rather than constituting a bar to claim.

[63] If contributory negligence is sufficiently great the reduction will be of 100 per cent, which may take the case into the zone embraced by voluntary assumption of risk.

[40] Accordingly, where a prospective purchaser receives a pre-purchase report, but fails to undertake the further investigations recommended in that report, that is likely to constitute contributory negligence. That contributory negligence may be sufficiently great to amount to voluntary assumption of risk, but it will not negate the existence of a duty of care.

[41] In the present case the conduct of Messrs Coughlan and Humphrey would be actionable apart from the Abernethys’ alleged knowledge and acceptance of the risk on receipt of the pre-purchase reports from Mr Beazley. The question therefore is whether the Abernethys assumed the risk. Although the appeal was not argued for Messrs Coughlan and Humphreys on this basis, I shall proceed as though it had been because the argument was presented for both sides in the context of whether the Abernethys did in fact voluntarily assume the risk that the property was a “leaky home”. Counsel for Messrs Coughlan and Humphrey submitted that their contributory negligence should have been assessed at near 100 per cent to reflect their voluntary assumption of risk.

[42] It is well-established that a person will not have voluntarily assumed a risk unless it is shown that he or she had full knowledge of the nature and extent of the risk and, with that full knowledge, in fact incurred it: Heard v New Zealand Forest Products Ltd.37 Unlike contributory negligence, which is determined objectively, voluntary assumption of risk is determined subjectively: The Law of Torts in New Zealand.38 The onus of proof is on the party alleging voluntary assumption of risk by the other party to establish the allegation: James v Wellington City.39

[43] In the present case the question therefore is whether Messrs Coughlan and Humphrey established that the Abernethys in fact had full knowledge of the nature and extent of their “leaky home” problems, which ultimately led to their claim for repairs totalling $201,568.06, from the pre-purchase reports they obtained from Mr Beazley in 2003.

[44] An examination of Mr Beazley’s two reports does not suggest that the Abernethys would have been made fully aware of the nature and extent of their “leaky home” problems before they purchased the property. The first report dated

Generally in reasonable condition only as this unit has been poorly maintained during its life but with a regular maintenance schedule put in place after remedial action should require little in the way of significant remedial work for some years to come.

Upon inspection and testing for possible moisture saturation of this dwelling it is considered there are current ingress problems to what degree is still to be discovered. The ground floor level readings fluctuated slightly this is however a common occurrence as minimal moisture is still being drawn through the concrete slab. The current condition of this property is what can only be considered as reasonable with the majority of all defects noticed to the exterior walls it is suggested that further intrusive inspections are recommended to ascertain the degree of moisture penetration to the internal framing if any.

[45] Mr Beazley carried out a subsequent “semi-intrusive” inspection of the rear entry, downstairs WC, laundry, both top floor bathrooms, and the ensuite. His report dated 4 August 2003 read as follows:

Non-intrusive moisture readings were taken at floor level just above the skirting line and recorded between 17-32% this is considered to be very high suggesting further intrusive inspection is required.

The first intrusive readings were taken to the left side of the door and recorded at 32% this is very high however the hammer was needed to penetrate the framing timber suggesting there are no significant wet rot problems appearing at present. The removal of the wall lining is recommended in the near future as this will assist in the drying process and then a full visual inspection of the framing timber will be available.

The second intrusive readings were taken to the right side of the door and recorded at 20% this reading would be acceptable to most council inspectors however wall lining manufacturers require the moisture reading to be at 18% or lower again the hammer was needed to penetrate the framing timber suggesting there are no significant wet rot problems appearing at present. The removal of the wall lining is recommended in the near future as this will assist in the drying process and then a full visual inspection of the framing timber will be available.

The floor directly in front of the rear door was tested with this large area of flooring showing all the signs of deterioration that extends some 1.2mtrs from the door and appears to be approximately 600mm wide. The only course of action in this case is to have this flooring replaced with inspection of the joists below carried out. All readings within this area were well in excess of 40%.

The WC intrusive readings were taken to the right rear corner and recorded in excess of 40% again the hammer was needed to penetrate the framing timber suggesting there are no significant wet rot problems appearing at

present. The removal of the wall lining is recommended in the near future as this will assist in the drying process and then a full visual inspection of the framing timber will be available.

Readings were taken to the left and right rear corners and recorded 23% again the hammer was needed to penetrate the framing timber suggesting there are no significant wet rot problems appearing at present. The removal of the wall lining is recommended in the near future as this will assist in the drying process and then a full visual inspection of the faming timber will be available.

Readings were taken to the exterior wall and recorded 27% again the hammer was needed to penetrate the framing timber suggesting there are no significant wet rot problems appearing at present. The removal of the wall lining is recommended in the near future as this will assist in the drying process and then a full visual inspection of the faming timber will be available. During the inspection it was noticed that the floor was wet with a number of personal items covering this damp it is therefore considered that the smell emanating within this room is a direct result of this.

Readings were taken to the right rear corner and along the exterior wall and recorded 18% indicating while there is some moisture present it is at an acceptable level according to wall lining manufacturers requirements again the hammer was needed to penetrate the framing timber suggesting there are no significant wet rot problems appearing at present.

The pressure relief pipe from the hot water cylinder appears to be leaking as a large damp spot is being created at the foot of the rear door this will need to be attended to by a qualified plumber in the near future.

There appears to be a number of issues that need to be addressed in terms removing wall linings to give the framing a chance to dry. In the first instance however the external cracks evident need to be repaired, as this will limit the present ingress.

[46] While Mr Beazley’s second report did identify a number of the water ingress problems which ultimately made the property a “leaky home”, it did not identify them all. Nor did it alert the Abernethys to the full nature and extent of the risk they were running in purchasing the property. Mr Beazley did not identify the lack of subfloor vents. Though he recommended an inspection of the subfloor, it cannot be said that the Abernethys possessed full knowledge of this risk. Mr Beazley reported

that the windows had been installed correctly, but the Tribunal found that some had not been. Mr Beazley did not identify the absence of vertical control joints.

[47] Most significantly, the Abernethys were left with the clear impression that the problems identified by Mr Beazley would be able to be overcome with repairs estimated to cost around $10,000. This figure appears in a contemporaneous document, being a facsimile from the Abernethys’ then solicitors, Bell Gully, to the respondents’ then solicitors, Haigh Lyon, dated 5 August 2003. While I accept that Mr Beazley did not give this figure as a reasoned assessment or conclusion, I am satisfied that the Abernethys genuinely and reasonably believed that, based on Mr Beazley’s reports, the cost of repairs would be around that figure.

[48] The view that the Abernethys were not aware of the full nature and extent of the risk is reinforced by –

a) The Tribunal’s unchallenged findings that Mr Beazley was negligent only to the extent of not identifying the lack of ventilation holes in the base of the building and that he was not negligent in concluding that the problems were largely maintenance issues;

b) The Tribunal’s finding that the Abernethys’ “calculated risk” in purchasing the property constituted contributory negligence; and

c) Mrs Abernethy’s statement under cross-examination that she “took a chance” that repair costs might be “slightly different” from the

$10,000 figure, and her consistent evidence to that effect. The Abernethys had no idea from Mr Beazley’s reports that the cost of repairs to their leaky home would ultimately amount to over

[49] For these reasons I am not satisfied that Messrs Coughlan and Humphrey have discharged the onus of proof of establishing that the Abernethys had full knowledge of the nature and extent of their “leaky home” problems before they purchased the property in September 2003.

[50] Accordingly, I find that the Abernethys’ knowledge at the time of purchase does not alter any duty of care that Messrs Coughlan and Humphrey owed to them as prospective purchasers, and that this duty of care is not negated by the defence of voluntary assumption of risk. I will return to the issue of contributory negligence later, after considering the other issues as to liability.

[51] It was not in dispute that Mr Coughlan was the designer of the house on the property at 5/6 City View Terrace and that in that capacity, subject to the previous issue, he owed a duty of care to the Abernethys as subsequent purchasers of the property to carry out his design work with reasonable care and skill. Instead it was submitted that the Tribunal was wrong “in fact and law” in finding that Mr Coughlan was negligent in omitting any reference in the plans for the house to the subfloor vents and the manufacturers’ instructions. The following specific points were made:

a) The Tribunal was wrong to rely on non expert opinion evidence in finding that the omission of subfloor vents from the plans was a breach of the designer’s duty of care;

b) There was no evidence of any general practice to include reference to manufacturers’ instructions concerning windows and control joints in Building Consent plans;

c) The manufacturer’s instructions did not require jamb flashings to be fitted to windows and the method adopted by the builders complied with accepted practice at the time of construction;

d) The cracking and water ingress around the windows was due to a lack of maintenance and not the result of a construction defect;

e) There is no evidence that a lack of vertical control joints caused any damage to the unit;

f) The designer did not cause poor workmanship or decisions made on site: Gray v Tulip Holdings Limited;

h) The Abernethys’ failure to mitigate known damage at the rear of the house limits any loss associated with this area to $10,597.50 including GST.

[52] I have considered each of these points and the detailed submissions made by Mr Maclean for Messrs Coughlan and Humphrey in support of them, but, for the following reasons, which are largely based on the submissions in response for the Abernethys, I am not persuaded that the Tribunal was wrong to decide that Mr Coughlan, as designer of the house, was in breach of his duty of care to the Abernethys. In reaching this conclusion I have taken into account the nature of the hearing before the Tribunal under the Weathertight Homes Resolution Service Act

2006 and the advantage which the Tribunal had in evaluating the evidence for the parties at the hearing.

[53] First, there was sufficient evidence before the Tribunal to support the Tribunal’s conclusion that Mr Coughlan was negligent in leaving the vents out of the drawings when they should have been included. The Tribunal was entitled to accept the evidence of Mr Higham, who had worked as Building Control Manager for the Franklin District Council in 1994, that the vents should have been included in the plans. The fact that Mr Higham may have had no architectural or design experience and was called as a witness for the Council did not mean that in the context of a hearing before the Weathertight Homes Tribunal the Tribunal was not entitled to accept his evidence as to general practice in 1994.

[54] The evidence of Mr Coughlan that he was not negligent in omitting the vents because he was entitled to rely on competent tradesmen to include standard and well- known construction details in plans prepared for the purpose of obtaining a building consent was, contrary to the submission of Mr Maclean, challenged under cross- examination. Reference to the transcript of the cross-examination shows that Mr Coughlan was cross-examined by counsel for the Abernethys about his reliance

on the Council and the builders for the level of detail in his plans, and the generally inadequate nature of his plans was put to him in the following exchange:

MR JOSEPHSON: Thank you. Mr Cartwright for the claimants will give evidence, in his views the plans for this particular unit are no more than concept plans, let alone intended for instruction purposes and are deficient and fail to address construction detailing and the exterior cladding and furthermore the specification was out of date and not specific to this project. Can I take it you disagree with that?

Although the Tribunal did not refer to the unchallenged evidence of Mr Cartwright, an ex-council building inspector called as an expert by the Abernethys, in support of his conclusion as to the inadequacies in Mr Coughlans’ plans, the evidence does provide further support for that conclusion.

a) It is no defence that the plans were accepted by the Council: Blair & Co Ltd v Queenstown Lakes District Council.40

b) Mr Coughlan was not entitled to rely on the Council’s inspections as a Council owes no duty to an architect or designer: Bell v Hughes41 and The Law of Torts in New Zealand.42

In the High Court in Sunset Terraces43 there were findings that in the circumstances of that case Mr Coughlan had been able to rely on the competent tradesmen involved and the developer, Mr Barton, to supervise the construction and to ensure compliance with relevant manufacturers’ specifications. The reference to this issue by the Court of Appeal in Sunset Terraces44 was based on the High Court findings. No such similar findings were made by the Tribunal in the

42 Stephen Todd (ed) The Law of Torts in New Zealand (5th ed, Thomson Reuters, Wellington, 2009)

43 _{Body Corporate 188529 v North Shore City
Council [2008] 3 NZLR 479 at [523]-[531].}

present case. On the contrary, as will be seen from [81]–[83] of his decision, he made quite different findings. Here, where labour-only tradesmen were employed by Stockdale, as developer, and Mr Humphrey’s role, as project manager, was limited, it was open to the Tribunal to reach a different conclusion on the facts.

d) Even where a defendant’s conduct meets the standard of general practice, he or she may be found negligent if the general practice falls below the required standard: McLaren Maycroft & Co v Fletcher Development & Co Ltd45 and Dicks v Hobson Swan Construction Ltd (In Liquidation).46

e) The Tribunal decision in Gray v Tulip Holdings Ltd47, which is not binding on the Court, may be distinguished on the facts because in that case it was found that the plans and specifications did specify that the cladding was to be fixed “to the manufacturer’s latest recommendations”. In the present case, as the Tribunal pointed out at [82], there was no reference in Mr Coughlan’s plans to the manufacturer’s instructions.

[56] Second, there was sufficient evidence before the Tribunal to support the Tribunal’s conclusion that Mr Coughlan was negligent in omitting any reference to the manufacturer’s instructions on the plans. The Tribunal summarised its views as follows:

45 _{McLaren Maycroft & Co v Fletcher
Development & Co Ltd [1973] 2 NZLR 101 (CA).}

46 _{Dicks v Hobson Swan Construction Ltd (In
Liquidation) [2005] NZHC 1657; (2006) 7 NZCPR 881 at [76].}

[81] Concerning the alleged failure to include James Hardie’s instructions with the plans, Mr Coughlan said that the instructions were known by the tradesmen at the time. The specifications stated: “EXTERIOR WALLS: Selected plaster finish to Hardibacker. Where shown on plan, exterior walls from top of base to eaves to be sheathed with selected hardibacker as shown on plans, fixed true in line, level and plumb at all angles.”

[82] It is acceptable for the manufacturer’s specifications not to be attached to the plans as long as the plans make reference to the manufacturer’s instructions, but there was no such reference here. There is a complication because Hardibacker was replaced by Harditex. Even so, Mr Higham said it was acceptable for there to be such a change without Council approval.

[83] I gained the distinct impression that Mr Coughlan was relying entirely on the builders knowing what the James Hardie requirements were or having access to them for either Hardibacker or Harditext. ...

[57] As counsel for the Abernethys pointed out, the Tribunal’s conclusion was supported by:

a) The unchallenged evidence of Mr Cartwright that it was critical that the manufacturer’s technical literature was specified on the plans and included in the building consent application.

b) The Tribunal’s questioning of Mr Coughlan about the lack of reference to the manufacturer’s literature and the fact that the cladding used (Harditex) was not the same as the cladding specified on the plans (Hardibacker).

c) The distinguishing features in Sunset Terraces and Gray to which reference has already been made.

Tribunal’s conclusion that the way in which the windows were originally installed in

1994 was defective and that, consequently, the claim in respect of damage to the east and north walls was established. The Tribunal summarised its views as follows:

[143] The surface water lying against the rear of the house has clearly been a contributing cause of the damage to the rear north wall. This is an extraordinary cause, not of itself the result of negligence on the first, second

and fourth respondents’ parts. However it is external water penetrating the building. I have concluded that for that reason, and because of the lack of vents, the probable lack of a vertical control joint, and the number of windows, the whole cost for repairing the north wall should be compensable.

[144] The eventual failure of the east wall is in part due to the failure to install the windows near the entry way correctly. That is proven to have caused damage. The cracks in the east wall may be the result of a lack of control joints, and a lack of maintenance. All these factors may have led to timber shifting. (This house has yet to be repaired so some of the causes are unknown. Also it is not known how much long term damage was caused by the previous owners’ neglect in the last year before they sold the property when a repaint was overdue).

[145] So while the need to replace the east wall is not wholly the result of the first, second and fourth respondents’ proven negligence, given the importance of the windows on this wall at the entry way, I find their negligence contributed to the extent that the whole of the cost of replacing the east wall should be included in the compensable figure.

[59] As counsel for the Abernethys pointed out, the Tribunal’s conclusions as to the defective installation of the windows as a contributing factor to the problems in respect of the north and east walls of the house were supported by:

a) The independent expert evidence of Mr P J O’Hagan, a registered building surveyor, called by the Abernethys. Mr O’Hagan gave evidence that the lack of jamb flashings and/or adequate sealing to the windows was where the major problem was coming from. He referred to E2/AS1 (September 93 to the August 94 edition) which required windows and doors to have head flashings and scribers or proprietary seals between facings and the building cladding. Mr O’Hagan went on to say that in this case all the windows had was a “lick of sealant which was never going to work” and that, when he pulled out some of the cladding alongside the window jambs, there did not appear to be any sealant or foam strip.

b) The independent expert evidence of Mr Light, the Weathertight Homes Resolution Service Assessor. Mr Light gave evidence that the July 1992 acceptable solution required joints between cladding and the exterior joinery to be waterproofed by the use of flashings and

sealing systems and that this was a general requirement at the time. Mr Light went on to say that:

The issue for me is that it is clear there are gaps and they could be filled and they should have been sealed if the windows are opening up as they seem.

When I did my second report I was very concerned about the amount of ingress I found in windows and I changed my view from – well, actually from no repairs required on the handrail, on any of the cladding, to a reclad, on the basis of the high moisture I was finding at window junctions and the such.

c) The independent expert evidence of Mr A J Roxburgh, a building consultant engaged by the Council. Mr Roxburgh confirmed that the windows would need to comply with E2/AS1, and would therefore need to have either a proprietary seal or a scriber.

d) The independent expert evidence of Messrs O’Hagan, Light and Roxburgh was sufficient to answer the evidence to the contrary of Mr Higham. On this issue it was open to the Tribunal to prefer the evidence of the former to the latter.

e) The fact that all the experts agreed that the remedial work to the windows was consistent with accepted practice at the time is not relevant because the Abernethys have not made any claims in relation to failed repairs to the windows.

[60] Fourth, there was sufficient evidence before the Tribunal to support the Tribunal’s conclusion that the cracking and water ingress around the windows was the result of a construction defect rather than due to a lack of maintenance. As counsel for the Abernethys pointed out:

a) Mr Beazley identified cracks around the windows in his reports and advised the Abernethys that they should undertake maintenance work to repair cracking around the windows. Accordingly, cracking around the windows existed in 2003. The Abernethys undertook the

maintenance work, as recommended by experts. The evidence is that the maintenance work was satisfactorily carried out. However, the problems still existed and became worse.

b) There was evidence that cracking was caused by the lack of vertical control joints and inadequate installation of windows. Mr Light listed nine possible causes of cracking to the texture coating. It is therefore unreasonable to assert that the cracking was a result of failure to maintain and that the Abernethys were responsible for cracking and water ingress around the windows.

c) The Abernethys undertook reasonable steps to maintain the house and, subject to later consideration of their cross-appeal, at least some steps to mitigate their loss. They relied on the advice they received and did what could reasonably have been expected of them.

d) The submission for Messrs Coughlan and Humphrey that Mr Light’s recommendation that the unit needed to be reclad was based on problems that were inherent in the cladding system itself was misleading. Mr Light was asked by Mr Maclean whether the system was inherently flawed, to which Mr Light responded: “I can’t say that

...” and went on to say that it was not in every case that these cladding systems failed.

[61] Fifth, there was sufficient evidence before the Tribunal to support the Tribunal’s conclusion that a lack of vertical control joints caused damage to the house. The Tribunal summarised the relevant evidence and its views as follows:

[41] Mr O’Hagan stated in his witness statement that there was a lack of horizontal control joints to the exterior cladding at inter story level at the floor joist centres, and that vertical control joints should have been created on the east and south walls at 5.4 metres.

[42] Mr Light’s view was that it is impossible to tell if there are horizontal control joints because at that time, the coating was applied over the control joints. He said it was possible that vertical control joints could have been obscured later and that sometimes cracks indicate that control

joints are working. Mr Light placed less emphasis on the alleged lack of vertical control joints that Mr O’Hagan did, as a cause of leaks and damage.

[43] The experts’ evidence shows that there appears to be a horizontal control joint to the exterior cladding at the rear of the property, the north wall, but there is uncertainty as to whether proper vertical control joints, called relief joints, were installed on that face.

[44] Mr O’Hagan was of the view that the vertical control joints had not been installed on the north wall because there was no indication of them when he felt underneath. The lack of vertical control joints has probably contributed to cracking on this wall.

[45] On the east wall, it is possible that a lack of vertical control joints has contributed to leaks and damage.

[46] Mr O’Hagan’s view that there is a lack of vertical control joints to the front south wall causing damage contrasts with Mr Light’s view. He emphasises the failure of the balustrades as the cause of damage on that face.

[53] Having regard to the experts’ evidence, the major causes of water ingress and damage are lack of sub-floor ventilation; lack of a vertical control joint to exterior cladding at the back of the building, direct contact of the cladding with the deck stringer combined with inadequate drainage at the back of the building; in adequate installation of the window at the front of the east wall at that entrance; and the flat topped timber capping to the deck barrier walls or balustrades especially at the south front of the building.

[62] Contrary to the submissions for Messrs Coughlan and Humphrey, it is clear from the Tribunal’s decision that it considered the relevant expert evidence and preferred the evidence of Mr O’Hagan to the evidence of Mr Light on this issue. There was, and could be, no suggestion that the Tribunal was wrong to do so in the context of this case. The submission for Messrs Coughlan and Humphrey that there was no evidence to support the Tribunal’s conclusion on this issue is incorrect.

[63] Sixth, the Tribunal did not err in not accepting the submission for Mr Coughlan that he was not liable because the defects were caused by poor workmanship and decisions made on site rather than by his plans and specifications. While there is no express reference in the Tribunal’s decision to this submission for Mr Coughlan, it is implicit in the Tribunal’s conclusions as to the inadequacies in Mr Coughlan’s plan and their effect that the submission was rejected.

[64] It is well-established that an architect or designer like Mr Coughlan owes a duty of care to subsequent purchasers such as the Abernethys to ensure that plans are drawn with due skill and care to avoid foreseeable losses to them arising out of his or her work: Bowen v Paramount Builders Ltd48 and Sunset Terraces.49

[65] An architect or designer may not avoid liability for foreseeable losses arising from his or her lack of due skill and care by shifting responsibility to a labour-only builder for failing to build something that is not detailed in the plans or according to a manufacturer’s technical information when the information is not referred to in the plans or attached to them. In the absence of adequate supervision, as in the present case, the plans and specifications should have been sufficiently detailed so that the contractors did not have to guess at details of construction.

[66] As already mentioned, the Tribunal decision in Gray v Tulip Holdings Ltd is not binding and may be distinguished. In the present case where the Tribunal found that Mr Coughlan’s plans omitted the vents and any reference to the manufacturer’s instructions there was therefore no basis on which Mr Coughlan was able to avoid liability by relying on the builders.

[67] Seventh, there was sufficient evidence before the Tribunal to support the Tribunal’s conclusion that the lack of sub-floor ventilation was partly responsible for the repairs necessary at the rear of the house and that the damage would not have occurred in any event. The Tribunal summarised the relevant evidence and its views as follows:

[33] There was disagreement amongst the experts as to the extent of damage caused by the absence of vents in the foundation blocks. The WHRS assessor, Mr Light, took the view that the lack of sub-floor ventilation has been an ongoing significant cause of damage to the sub-floor, floor and framing of the dwelling. Mr Roxburgh, the expert engaged by the Council, like Mr Light, considered that it would have been prudent to place plastic sheeting over the soil in the rear sub-floor as a vapour barrier.

[34] On the other hand, Mr McLintock, engaged by the first, second and fourth respondents, was of the view that the volume of exterior water striking the dwelling at the base of the rear was such that sub-floor ventilation would not have prevented damage. Mr McLintock’s evidence

related to the large volume of surface water in the vicinity of the north wall under the ground level deck at the back of the house. The other experts commented upon this. All the experts and Mr Beazley have identified that as a problem.

[35] There was disagreement as to how much of this water under the deck flowed from the chamber that was installed at the back of the section to re- direct ground water being piped from a cesspit in the section at the rear,

3 Pupuke Road, across 5/6 City View Terrace’s section and away. Mr McLintock stated that he saw the sink-hole or chamber overflowing and

[36] Mr Roxburgh wrote that he agreed with Mr McLintock that the soak pit ought to have been adequate to cope with any excess ground water. However it appears that this chamber was designed and installed solely to deal with water being piped from the section above, not the water on this property’s section. That is Mr O’Hagan’s view. He stated in his witness statement in reply that there is a lack of sub-soil drainage at the rear wall to deal with the accumulating water.

[37] In any event, there was consensus that the long-term saturation of the soil under the rear ground level deck shows there is a problem with drainage on the sloping ground at the back of the unit.

[38] I conclude that the damage at the rear of the property, to the sub- floor framing, the floor and to a degree the framing and cladding, is in part due to surface and subsoil water at the base of the building arising from inadequate drainage. I conclude that the lack of submission-floor ventilation is also partly responsible for the repairs necessary at the rear of the house.

[68] Contrary to the submission for Messrs Coughlan and Humphrey, it is clear from the Tribunal’s decision that it considered the relevant expert evidence, including the evidence of Mr McLintock, the registered civil engineer, which they relied on, and accepted the evidence of Messrs Light, Roxburgh and O’Hagan that had vents been installed they would have made a difference. While Mr McLinctock gave evidence that he did not think ventilation would have had a significant effect on taking the moisture away, he accepted that it would have had some effect. In light of the relevant evidence on this issue, the Tribunal was entitled to reach the conclusion that it did. The Tribunal was not wrong to do so.

[69] As counsel for the Abernethys also pointed out, the lack of sub-floor ventilation did not have to be the sole cause of the damage or to cause all of the damage. It was sufficient if it materially contributed to the damage in whole or in part, and if so, Messrs Coughlan and Humphrey were liable for the full loss:

[70] Eighth, the Tribunal did not err in not accepting that the Abernethys had failed to mitigate known damage at the rear of the house so that any loss associated with that area should be limited to $10,597.50 including GST.

[71] On this issue, I accept the submissions for the Abernethys in response that:

a) The problems at the rear of the house were not fully identified in the pre-purchase reports and the Abernethys were not aware of the extent or causes of the problems. The Abernethys carried out a number of the items suggested as remedial work and attempted to instruct experts and contractors to carry out further remedial work.

b) The submission for Mr Coughlan that no further maintenance or repair work was done to the house between January 2005 and the date of the hearing is incorrect. The Abernethys arranged for a number of repairs and maintenance issues to be addressed during this period of time. In this respect, subject to later consideration of their cross- appeal, the Abernethys took at least some steps to mitigate their loss.

c) The Tribunal accepted the evidence that the property required a full reclad and that the remedial costs claimed by the Abernethys were reasonable: at [57]. There was no debate about the remedial costs between the experts.

d) The Tribunal found that the cost to repair the north wall (including the damage caused by the defects in relation to the sub-floor) was 35 per cent of the total cost of the repairs: at [153]. Part of the damage to the north wall elevation was caused by the failure to design and install vents, it was also found to be caused by a failure to install vertical

51 Findlay and Sandelin v Auckland City Council HC Auckland CIV-2009-404-6497, 16 September

52 Stephen Todd (ed) The Law of Torts in New Zealand (5th ed, Thomson Reuters, Wellington, 2009)

e) The damage that Mr Coughlan was held liable for was not isolated to the vents. There were a number of defects that were causative of the damage requiring repair.

f) Mr Light’s estimated figure to repair the sub-floor area in 2004 bore no resemblance to the 2009 figure for repairing the whole house. There was therefore no foundation for the submission that Mr Coughlan’s liability should be capped at $10,597.50.

[72] In summary, in relation to the liability of Mr Coughlan, I have not accepted any of the grounds of appeal advanced on his behalf. In respect of the grounds where it was alleged that there was no evidence to support the Tribunal’s findings I have held that there was evidence or that the Tribunal was entitled to prefer the evidence of particular witnesses. In respect of the grounds based on submissions of law I have preferred the submissions for the Abernethys in response.

[73] I now turn to consider the appeal in relation to the liability of Mr Humphrey.

b) He was not engaged to supervise the contractors and did not in fact manage the project;

d) Alternatively, the builders were not negligent so Mr Humphrey was not negligent either;

[75] It is convenient to set out in full the Tribunal’s findings in relation to

[99] Mr Humphrey said his role was that of a quantity surveyor. He acted as a co-ordinator. He organised materials and subcontractors but he did not control the site. That was part of the terms of arrangement with Mr Coughlan. The labour-only contractors were independent in their work and were used to taking responsibility. They worked from start to finish without overseers. He was never employed at that time as a site manager.

[100] Mr Humphrey said he obtained quotes, for the windows etc, and arranged delivery dates. He did a lot of the work as and when required, a lot of it on his cell phone. He would telephone the suppliers.

3 Pupuke Road, the Council instructed what the remedy was and a drain layer was engaged.

[102] Concerning the question of whether anybody was responsible for the quality of building work, Mr Humphrey said the Council inspectors were (responsible) in those days – they passed work or rejected it.

[103] Mr Humphrey said he was a builder by profession and did quantity surveying for this job as it was simple, quoting for the building elements. It was important to keep costs to a minimum as they had a mortgage. He only took the same amount as Mr Coughlan took for drawing the plans and obtaining consent. Mr Humphrey said he had to earn a living. He was paid, from memory, $6,000.00. He did other work at the same time at other jobs to support himself. The earlier units built on that general site were on the same basis.

[104] He said that construction went ahead smoothly as there were experienced contractors. He did not remember who they were. The industry changed from waged workers to labour-only contractors. There was no reason to treat such contractors any differently than plumbers or drain layers

[105] The building contractors installed the cladding. Mr Humphrey said he did not recall the change from Hardibacker to Harditex. He said that he was not an expert on the difference.

[106] I accept Mr Humphrey’s evidence that Stockdale and its directors left it to the three labour-only builders and other contractors to run the site, and I accept Mr Humphrey’s evidence that he was not managing the project in the sense that he was personally controlling or supervising the site. He was engaged by Stockdale to work part-time administering the project by engaging labour only contractors and ordering supplies to be delivered at the times the contractors on site said that they were required. This was a three unit development and Mr Humphrey carried out his duties part time.

[107] However I consider that Mr Humphrey’s appointment to the position of project manager did impose on him a duty of personal responsibility and care. He was paid as an employee of the company to carry out this task.

[108] In Body Corporate 185960 & Ors v North Shore City Council & Ors (‘Kilham Mews’) (22 December 2008) HC, Auckland, CIV 2006-404-3535, Duffy J endorsed the view of Tribunal Dean that project managers must carry the burden of responsibility for not taking adequate steps to ensure that

those under them achieved the required standards. Duffy J stated that was a sensible approach, and that if someone is charged with the responsibility for managing a residential project, the likelihood of careless workmanship and defective construction resulting from poor and careless management would be reasonably foreseeable to that person.

[76] The Tribunal’s factual findings as to the role of Mr Humphrey as project manager, which are challenged on appeal, were based on the evidence of Mr Humphrey, including his cross-examination and questioning by the Tribunal. In his brief of evidence, Mr Humphrey explained his role as follows:

1994 I was a director of Stockdale Investments Auckland Limited (“Stockdale”). Stockdale was incorporated in 1981. I resigned from the company on 5th March 2002.

6. I was employed on a short term contract basis by Stockdale to manage the construction process. I organised all materials and paid the accounts and took care of the paper work. I was not involved on site in the construction of the units and did not supervise the builders’ work.

[77] The relevant parts of the cross-examination of Mr Humphrey read as follows:

MR HUMPHREY: I was acting as co-ordinator. Initially I did quantity surveying for materials and co-ordinated the subcontractors.

MR HUMPHREY: Not control as such. As far as getting the materials on site I did, but that was taken off the plans.

MR HUMPHREY: I don’t know what you mean by the word control. The labour-only contractors were independent and they did the construction process.

MR HUMPHREY: The terms of my arrangement with Dick Coughlan was that I was do, as I said, the quantity surveying, get in quotes for the different elements like windows and such and just liaise with the subcontractors as to the dates they wanted materials delivered. I was working independently ...

MS WEBBER: So to a degree you both had some sort of control over that process?

MR HUMPHREY: Well we had some control over who was employed. But beyond that I fail to see what you’re getting at.

[78] The relevant parts of the questioning of Mr Humphrey by the Tribunal read as follows:

ADJUDICATOR: Were you doing other jobs at the same time of this nature or --?

MR HUMPHREY: Yes, I was, because the reason for that is when Dick and I – Dick Coughlan and I first talked about doing those three units, at the time, we had obviously borrowed money from the bank and we decided that we’d keep any costs to a minimum, so I only took the same amount of money as fee charge for – to doing the plans and specifications and getting the building consent through. And I can’t remember the exact figure, but I think it was probably around about $6000 and that was the reason for my involvement. But being so small I had to work on other jobs of my own to support myself.

ADJUDICATOR: So just to follow up from Miss Webber’s question about was anybody responsible for the quality of the building works and you said words to the effect – I think I remember your saying that would have been, at the end of the day, the council. Did you ever appoint actively somebody who was on site controlling the contractors and subcontractors and –

MR HUMPHREY: No we didn’t, because we didn’t see any point in that, because the people who did it were labour-only contractors who were used to take responsibility for that.

ADJUDICATOR: This is my last question, but it’s an important question following on from what Miss Webber has asked you. Do you regard it as acceptable that you and Mr Coughlan, as the two directors of this company, which was the developer, had roles which, by the evidence of each of you, was so limited. Because Mr Coughlan’s evidence was along the same lines as far as the plans were concerned, that his role was, as you probably have read he described it, and yours was like it was. So, doesn’t that kind of leave, to use layman’s language, Stockdale Investments (Auckland) Limited headless? As a development company?

ADJUDICATOR: Doesn’t that leave Stockdale Investments Limited, headless. In other words, it’s a company that’s a development company engaging in a development but it doesn’t seem, according to Mr Coughlan and your evidence, actually to have a chief executive officer who it takes overall responsibility for the actual development that the company was formed to undertake? Is that true? Because that seems to be what you’re both saying.

MR HUMPHREY: Well, I don’t how it can be called headless. There was only the two of us involved in it and it wasn’t a major building contract. It went ahead smoothly and he had his role, I had my role. We had the experienced contractors to do the building. I don’t see the problem there.

[79] On the basis of Mr Humphrey’s evidence it was open to the Tribunal to make the factual findings which it did in relation to Mr Humphrey’s role as project manager. I do not accept the submission for Mr Humphrey that there was no

evidence to support the Tribunal’s findings. The fact that Stockdale engaged independent contractors did not mean that Mr Humphrey ceased to be the project manager.

[80] On the basis of the Tribunal’s factual findings it was then open to the Tribunal to decide that Mr Humphrey in his role as project manager owed a duty of care to ensure that the workmanship on site was adequate. In reaching this conclusion the Tribunal was entitled to rely on the decision in ‘Kilham Mews’53 where Duffy J said:

[106] The principle in Bowen that contractors, architects and engineers are all subject to a duty to use reasonable care to prevent damage to persons whom they should reasonably expect to be affected by their work has already been recognised to extend to project managers. In Shepherd and Ors v Lay and Ors unreported WHT Claim 939, 11 March 2005, Tribunal Dean, found that project managers must carry the burden of responsibility for not taking adequate steps to ensure that those under them achieved the required standards. This seems to me to be a sensible approach. If someone is charged with responsibility for managing a residential building project, the likelihood of careless workmanship and defective construction resulting from poor and careless management would be reasonably foreseeable to that person.

[107] In Body Corporate No 188289 v Leuschke Group Architects Harrison J identified the cornerstone of liability as being the assumption of a degree of personal responsibility for an item of work which was subsequently proved to be defective. It follows that someone who takes on the role of project manager of a residential construction project assumes a degree of responsibility for ensuring that the work is performed with reasonable skill and care.

[81] It was not suggested for Mr Humphrey that the nature and scope of the duty of care owed by a project manager, as formulated by Duffy J, was wrong. Rather it was submitted that the duty did not apply to Mr Humphrey because he was not engaged by Stockdale to supervise the work and assumed no responsibility for doing so. Responsibility for the decision not to engage an independent person to supervise the building contractors’ work lay with Stockdale.

[82] I agree with the submission for the Abernethys in response that once the Tribunal’s factual finding that Mr Humphrey was the project manager is upheld then the duty of care existed and cannot be avoided or limited by reliance on decisions made by Stockdale. The Tribunal’s factual finding is determinative: cf Lake v

Bacic54 where there was no duty of care because the appellant was found not to be a project manager. The decisions by Stockdale to engage contractors and not to engage an independent supervisor did not mean that Mr Humphrey, as project manager, was not personally responsible for ensuring that the work was performed by the contractors with reasonable skill and care: cf Body Corporate No 188273 v Leuschke Group Architects.55

[83] It was then argued for Mr Humphrey that if he did owe a duty of care to the Abernethys he was not in breach of his duty because the cracking in the cladding was a maintenance issue and not the result of negligence by the builders and, in any event, like Mr Coughlan, Mr Humphrey’s liability should be capped at $10,597.50 including GST.

a) Overall the negligence of the inadequately supervised builders contributed to the defects in the house as found by the Tribunal at [53].

b) As already held in this judgment at [60], the Tribunal correctly decided that the cracking in the cladding was the result of a construction defect and not due to lack of maintenance.

c) As already held in this judgment at [70]–[71] in relation to Mr Coughlan, there is no basis for capping the liability of Mr Humphrey at $10,597.50.

[85] In summary, in relation to the liability of Mr Humphrey, I have not accepted any of the grounds of appeal advanced on his behalf. I now turn to consider the Abernethys’ cross-appeal.

53 Body Corporate 185960 & Ors v North Shore City Council & Ors (‘Kilham Mews’) HC Auckland

54 _{Lake v Bacic HC Auckland
CIV-2009-004-001625, 1 April 2010 at [33]–[41].}

55 Body Corporate No 188273 v Leuschke Group Architects (2007) 8 NZCPR 914 (HC) at [37]-[39]

[86] I note first that the approach adopted to the appeal should also be adopted to the cross-appeal: Lake v Bacic.56

[87] It is convenient to deal with the five grounds of the cross-appeal separately.

[88] Having upheld the Tribunal’s decision in respect of the liability of Messrs Coughlan and Humphrey as designer and project manager respectively, it is, strictly speaking, unnecessary for me to determine the Abernethys’ cross-appeal argument that Messrs Coughlan and Humphrey were also liable as developers and that the Tribunal was wrong to decide otherwise. In case, however, my decision upholding the Tribunal in respect of their liability as designer and project manager was wrong, I should record that I would not have accepted the Abernethys’ cross- appeal argument essentially because I agree with the Tribunal that the evidence established that Stockdale was the developer, not Messrs Coughlan and Humphrey personally. Once the Tribunal’s factual finding is upheld there is no basis in law for imposing a personal and non-delegable duty of care to subsequent pruchasers on a

[89] As already noted, on this aspect of the cross-appeal the Abernethys must show that the Tribunal, in exercising its discretion under s 72(2) of the Weathertight Homes Resolution Services Act 2006 and s 17(2) of the Law Reform Act 1936, erred in law or principle, took account of irrelevant considerations, failed to take account of a relevant consideration, or reached a decision that was plainly wrong: Findlay

58 Findlay and Sandelin v Auckland City Council HC Auckland CIV-2009-404-6497, 16 September

[90] In the present case the Tribunal addressed the issue of apportionment as follows:

[172] When the Council withdrew, the Tribunal was left with the impression that it had reached a final settlement. It was only when final submissions were presented that Mr Josephson advised, surprisingly, that it was part of the settlement agreement that the claimants would represent the Council in pursuing cross-claims against the other liable parties and in making submissions as to what the apportionment of liability between them should be.

[173] I invited written submissions on apportionment in the closing supplementary submissions. Mr Josephson and Ms Webber submitted that in other cases the Council’s liability was 20%, with other parties liable for the balance.

[174] Mr McLean submitted that in this case, where the builders are absent and where no-one who actually built the house is a respondent, the Council’s liability ought to be higher than that, in the region of one third. Mr McLean submitted that if all the respondents were equally responsible for failing to detect the defects, the contributions should be equal as well. On this basis he submitted that the contributions should be Mr Couglan, Mr Humphrey and Stockdale one third; the Council one third; and Mr Beazley one third.

[175] However, because the Council withdrew after it had settled, the adjudication hearing did not deal with the Council’s actions and potential liability.

[176] Under section 17 of the Law Reform Act 1936, any tortfeasor is entitled to claim a contribution from any other tortfeasor in respect of the amount to which he or it would otherwise be liable. Section 17(2) provides that the amount of contribution shall be what is found to be just and equitable having regard to the relevant responsibilities of the parties for the damage. It is likely that the same criteria are to be applied under section 72 of the Weathertight Homes Resolution Services Act 2006.

[177] Under section 72(2), the apportionment between respondents is to be in relation to any liability determined. But when the Council left I was not asked, and I am not in a position, to determine formally whether the Council itself is liable and what the Council’s liability should be. Also the Tribunal has the discretion under those sections to make an apportionment.

[178] The Council took a commercial risk in settling with the claimants. It would not be fair on the other liable parties for the Tribunal to now attempt to apportion some of the liability the Council took upon itself to put an end to the claim against it, to them. I consider that the only fair and practical course in the circumstances is for me to leave the Council’s settlement out of the apportionment.

[179] I find that the first, second and fourth respondents all breached their respective duties of care owed to the claimants to the extent described and they have all been found liable for the total amount of $150,310.86. The first, second and fourth respondents are jointly and severally liable for the total established amount of the claim. However, for the reasons above,

[180] They are concurrent tortfeasors and therefore each is entitled to a contribution from the others towards the amount of their liability, according to the relevant responsibilities of each for the same damage as determined by the Tribunal.

[91] For the Abernethys, it was submitted that the Tribunal erred in failing to consider the position of the Council and in failing to award the Council contribution on its cross-claim against Messrs Coughlan and Humphrey. Reference was made to Baylis v Waugh,59 s 17(1)(c) of the Law Reform Act 1936, and The Law of Torts in New Zealand.60 It was submitted that in terms of s 17(2) of the Law Reform Act

1936 and guidelines from previous similar cases that it would be “just and equitable” for the apportionment to be 75 per cent to Messrs Coughlan and Humphrey, 15 per cent to the Council and 10 per cent to Mr Beazley.

[92] For Messrs Coughlan and Humphrey, it was submitted that when the Abernethys “discontinued” their claim against the Council, the Council ceased to be a party to the Tribunal proceeding. As no evidence was given at the hearing touching the claim against the Council, the Tribunal did not consider the claim or whether the Council was liable. The “discontinuance” against the Council meant that all cross-claims relating to the Council were discontinued as well. Accordingly, as the Tribunal recognised at [177] of its decision, there was no jurisdiction to make any ruling on cross-claims for contribution concerning the Council. It is a prerequisite to the exercise of jurisdiction under s 17(2) of the Law Reform Act 1936 and s 72(2) of the Weathertight Homes Resolution Services Act 2006 that the tortfeasor against whom the contribution is sought is a party to the proceeding. The Tribunal’s decision was therefore correct and, in the absence of Mr Beazley, the Council and Stockdale as parties to this appeal, there is no basis for the High Court to adjust their contribution. It would be unfair to do so.

[93] There is no doubt that, “in relation to any liability determined”, a Weathertight Homes Tribunal has power to apportion liability between respondents to a claim under the Weathertight Homes Resolution Services Act 2006 because s 72(2) provides:

60 Stephen Todd (ed) The Law of Torts in New Zealand (4th ed, Thomson Reuters, Wellington, 2005)

In relation to any liability determined, the tribunal can also determine – (a) any liability of any respondent to any other respondent ...

[94] The Tribunal’s power to apportion liability between respondents is analogous to the similar power of the Court to apportion liability between joint tortfeasors conferred by s 17 of the Law Reform Act 1936: cf Patel v Offord.61 Under s 17(1):

(1) Where damage is suffered by any person as a result of a tort (whether a crime or not)—

(c) Any tortfeasor liable in respect of that damage may recover contribution from any other tortfeasor who is, or would if sued in time have been, liable in respect of the same damage, whether as a joint tortfeasor or otherwise, so, however, that no person shall be entitled to recover contribution under this section from any person entitled to be indemnified by him in respect of the liability in respect of which the contribution is sought.

[95] In exercising the power to apportion liability between respondents, the Tribunal should therefore follow the approach stipulated by s 17(2) of the Law Reform Act 1936 which provides:

In any proceedings for contribution under this section the amount of the contribution recoverable from any person shall be such as may be found by the Court to be just and equitable having regard to the extent of that person's responsibility for the damage; and the Court shall have power to exempt any person from liability to make contribution, or to direct that the contribution to be recovered from any person shall amount to a complete indemnity.

[96] In the present appeal, as the submissions for the parties recognise, the issue is whether the Tribunal ought to have exercised its power to apportion liability between the respondents, that is the Council, Stockdale, Messrs Coughlan and Humphrey, and Mr Beazley, when the Council settled with the Abernethys at the hearing and played no further part so that in fact there was, as the Tribunal pointed out in its decision at [175]–[178], no basis on which it could, in fairness, apportion the Council’s liability between the other respondents.

[97] It is correct, as was submitted for the Abernethys, that settlement with one joint tortfeasor does not of itself prevent subsequent apportionment of liability between all joint tortfeasors: Baylis v Waugh, Body Corporate 191608 v North Shore

City Council,62 and The Law of Torts in New Zealand.63 But, as the decisions in Baylis and Body Corporate 191608 and the authorities referred to in Todd indicate, the party which settles must pursue its claim for contribution against the other joint tortfeasor(s) so that the Court is in a position to determine on a “just and equitable” basis the appropriate level of apportionment between the joint tortfeasors, including the party which settled. As the Tribunal rightly recognised in this case, the absence of the Council from the hearing after it settled with the Abernethys and its failure to pursue its cross-claims against the other respondents meant that the Tribunal was not in a position to determine and apportion the Council’s liability. Having not determined the Council’s liability, the Tribunal did not have power to apportion the Council’s liability under s 72(2) of the Weathertight Homes Resolution Services Act

2006 and s 17(1)(c) of the Law Reform Act 1936 or to decide what apportionment of the Council’s liability would be “just and equitable” under s 17(2) of the Law Reform Act 1936. In this respect the position of apportionment of contribution between joint tortfeasors is to be distinguished from the position of a claimant whose contributory negligence must be assessed in light of the fault of all potential

tortfeasors: cf Findlay and Sandelin v Auckland City Council.64 The question of

apportionment between joint tortfeasors depends on a claim for contribution by a tortfeasor against another tortfeasor and does not affect the claimant’s right to recover damages awarded against any of the tortfeasors on a joint and several basis.

[98] The Abernethys may have been under an obligation in terms of their settlement with the Council to raise the issue before the Tribunal, but to do so during final submissions was too late. The Tribunal decided that it was not in a position to determine the issue. I do not accept that it erred in reaching this conclusion.

[99] I also agree with counsel for Messrs Coughlan and Humphrey that in the circumstances of this case the High Court is not in a position to carry out a new liability apportionment exercise as suggested by counsel for the Abernethys: cf s 95(1)(b) of the Weathertight Homes Resolution Services Act 2006.

62 Body Corporate 191608 v North Shore City Council HC Auckland CIV-2008-404-2358, 9 June

63 Stephen Todd (ed) The Law of Torts in New Zealand (5th ed Thomson Reuters, Wellington, 2009)

64 Findlay and Sandelin v Auckland City Council HC Auckland CIV-2009-404-6497, 16 September

[100] For completeness I note that I have not reached my conclusion on this ground of cross-appeal on the basis of the submission for Messrs Coughlan and Humphrey that the Abernethys “discontinued” their claim against the Council in the sense contemplated by the High Court Rules because a formal “discontinuance” of that nature would have required the written consent of all the other respondents: r 15.20(4) of the High Court Rules. I have approached this ground of appeal on the basis that it was for the Abernethys to show that the Tribunal erred in the exercise of its discretionary decision on apportionment. I am not satisfied that in the circumstances of this case arising from the Council’s settlement and withdrawal that the Tribunal did err in declining to determine and apportion the Council’s liability.

[101] On this ground of their cross-appeal, the Abernethys argue that the Tribunal’s decision to award them only 50 per cent of the total cost of repairs and professional fees of $240,668.06 was plainly wrong and a conclusion not reasonably available on the evidence because, according to well-established principles, they were entitled to recover as compensatory damage the sum required to put them in the position they would have been if the wrong had not been committed and that, confronted with the prospect of having to repair two walls, they had no option but to repair four walls.

[102] For Messrs Coughlan and Humphrey, it was submitted in response that it is well-established that, where it is practicable to determine the extent of the contribution between tortious and non-tortious causes, damages should be apportioned between the different causes and here the Tribunal’s approach was correct because the evidence before the Tribunal established that the damage to each wall of the house was separately identifiable and the remedial costs quantifiable.

[103] The legal principles relied on by the parties are well-established: The Law of Torts in New Zealand.65 The question is whether the damage is indivisible or not so that in practical terms the cost of repairs is able to be apportioned between the different areas of damage and their causes. The question is a question of fact dependant on the circumstances of the particular case.

[104] In the present case, as the Tribunal held at [138]–[154], the evidence before the Tribunal did establish that the damage to each wall of the house was separately identifiable and the remedial costs quantifiable. As counsel for Messrs Coughlan and Humphrey pointed out, the relevant evidence comprised:

20 June 2007, and the plans for the proposed re-cladding of the house which distinguished in practical terms between the south, east and north elevations (or walls) of the house.

b) The Kwanto Estimate of Remedial Costs prepared for O’Hagan Building Consultants Ltd dated 6 July 2007, which contained a separate breakdown of estimates of remedial costs for the north ($19,122.50), west ($0.00), south ($37,793.50) and east ($14,318.00) elevations.

c) The Boss Projects Ltd tender price, which used the Kwanto estimate, was the successful tender.

[105] On the basis of this evidence, the Tribunal was entitled to conclude that it was practicable to distinguish between the four walls, the causes of the damage to them and the costs of repairing them, for the purpose of deciding that “the compensable proportion” should be 35 per cent (north wall) plus 15 per cent (east wall) making 50 per cent or $120,334.03. I am therefore not satisfied that the Tribunal was wrong to reach this conclusion.

[106] On this ground of their cross-appeal, the Abernethys argue that the Tribunal’s decision to reduce their damages by 10 per cent for contributory negligence and failure to mitigate their loss was based on flawed methodology and did not have an evidential basis. The Tribunal’s methodology was flawed because contributory negligence, which involves a percentage apportionment, should not have been combined with failure to mitigate, which requires proof of a dollar amount.

[107] For Messrs Coughlan and Humphrey, it was argued that the 10 per cent contribution was too low and that an award of somewhere near 100 per cent was required to reflect the Abernethys’ voluntary assumption of risk and relative responsibility for their loss. It was agreed that the Tribunal had confused contributory negligence and failure to mitigate loss which were two distinct matters.

[108] The Tribunal addressed the issues of contributory negligence and failure to mitigate loss in the following paragraphs of its decision:

[163] I have had regard to Mr and Mrs Abernethy’s evidence and their valuer’s report, and their solicitor’s memorandum of 31 July 2003 to the vendors’ solicitor. This states that Mr and Mrs Abernethy had received Mr Beazley’s first report and had concerns about a downpipe, the condition of and numerous cracks in the exterior cladding, and some areas of potential water leakage. They asked through their solicitors for consent for invasive tests to be carried out. As it has turned out, Mr Beazley did not receive such consent. But nonetheless, having regard to his second report, I find that there was an element of contributory negligence by the Abernethys. They knew that the building was built of risky materials; that it had been badly neglected by the vendors; and that it was likely moisture had already penetrated the building envelope.

[166] The question also arises whether the overall figure for damages should be reduced because they did not mitigate their losses by immediately taking steps to have ventilation installed and sheeting laid over the ground in the sub-floor area after the first WHRS report was received. Mr and Mrs Abernethy have addressed a number of relatively minor issues since Kwanto the quantity surveyor’s engagement, amounting to the $3,953.04.

[167] Nevertheless, Mr and Mrs Abernethy decided to live abroad in January 2005 when the problems with the house that Mr Light had identified in July 2004 were still unresolved. Even though Mr Kime was appointed, he apparently did not know when they left New Zealand that the house was, officially, leaky. Mrs Abernethy did arrange with Mr Kime to obtain quotes but they received conflicting advice as to what they should do. Two contractors were unwilling to undertake work because they were uncertain how the house should be further repaired. The first engineer engaged was let go because of the conflict of interest, before Mr O’Hagan was engaged in

[168] As a result, the recommendations in Mr Light’s first report have never been implemented or fully implemented, including installing sub-floor vents. Nor has the problem with drainage been addressed by the laying of new pipes across the back of the section.

[169] While they needed to be sure of what needed to be done, Mr and Mrs Abernethy’s decision to live abroad must be seen as a factor in the delay in addressing the problems and damage that were coming to light before they left.

[170] Taking all those factors into account, especially their assumption of risk given the materials and previous lack of maintenance, and the delay, the figure of $167,012.07 should be reduced by 10%, $16,701.21, giving a final

figure of $150,310.86. The first respondent, the second respondent, at least by implication and at least to the extent of $90,000.00 the third respondent, and the fourth respondent are all jointly and severally liable to the claimants for this amount. Mr Beazley the fifth respondent’s liability is more limited.

[109] In considering the submissions of the parties on appeal in relation to this part of the Tribunal’s decision, I take into account the following points:

a) I have already decided that Messrs Coughlan and Humphrey did not discharge the onus of proof of establishing that the Abernethys had full knowledge of the nature and extent of their “leaky home” problems before they purchased the property in September 2003 so that the defence of voluntary assumption of risk was not available: at [42]–[50] above.

b) I have also already decided that the Tribunal was not wrong in finding Messrs Coughlan and Humphrey liable to the Abernethys in negligence for breach of their respective duties of care as designer and project manager: at [72] and [85] above.

c) The defences of contributory negligence and failure to mitigate loss are conceptually different and should therefore be considered separately: The Law of Torts in New Zealand.66 Under s 3 of the Contributory Negligence Act 1947, when damage is caused by fault on the part of both defendant and plaintiff, the Court may in its discretion apportion responsibility between them. Ordinary principles of causation and remoteness apply. Failure to mitigate loss arises because a plaintiff is under a duty, which is not particularly onerous,

to take reasonable steps to mitigate loss and thereby minimise the damages the defendant will be required to pay. Contributory negligence is concerned with identifying the plaintiff’s fault contributing to the damage and apportioning responsibility for it (by way of a percentage), whereas breach of the duty to mitigate loss requires identification of the “reasonable steps” the plaintiff ought to have taken and assessment of the amount by which the damages should be reduced as a result of the plaintiff’s failure to take such

steps. Apportionment of responsibility to reflect a factual finding of contributory negligence and reduction of damages to reflect a factual finding of a failure to mitigate loss are different exercises, involving different findings and, in the case of contributory negligence, a discretion in apportioning responsibility. The exercises should therefore be carried out separately so that it is clear that the correct approach has been followed in each case, particularly if the separate

d) In this case the Tribunal made separate factual findings in relation to the Abernethys’ contributory negligence (at [163]–[165]) and their failure to mitigate their losses (at [166]–[169]), but then, instead of apportioning their responsibility for contributory negligence and assessing the amount by which their damages should be reduced as a result of their failure to mitigate, simply decided that the damages of

$167,012.07 should be reduced by 10 per cent ($16,701.21) to give a final figure of $150,310.86. It is therefore not possible to determine from the Tribunal’s decision what the apportionment was for contributory negligence or what the amount for the reduction in damages was for the failure to mitigate loss.

[110] The contributory negligence issues on appeal are therefore whether the Tribunal was right to make a factual finding of contributory negligence on the part of the Abernethys and, if so, whether it exercised its discretion appropriately to apportion their responsibility at some unknown figure less than 10 per cent. The failure to mitigate loss issues are whether the Tribunal was right to make a factual finding that the Abernethys had not taken reasonable steps to mitigate their loss and, if so, whether it correctly assessed the reduction in damages for that failure at some unknown figure less than $16,701.21.

[111] I agree with counsel for the Abernethys that they acted reasonably in obtaining the pre-purchase reports from Mr Beazley and in negotiating a reduction in the purchase price to reflect part of the cost of the repairs he identified. At the same time, however, they proceeded with the purchase of the house knowing from the reports and the fact that full invasive tests, as recommended by Mr Beazley, had not been carried out that they were running some risk in doing so, particularly as they also knew there was significant deferred maintenance. On the basis of Mr Beazley’s reports, the risk was minor, but it cannot be said that the Tribunal was wrong to take it into account in finding an element of contributory negligence and in apportioning it at a figure below 10 per cent.

[112] I also agree with counsel for the Abernethys that, as their mitigation chronology shows, they did take various steps to mitigate their loss over the period from September 2003 to August 2008. At the same time, however, there were significant delays in carrying out the work recommended by Mr Light, the WHRS assessor, in his first report of 28 July 2004, particularly after the Abernethys decided to live abroad in January 2005. On the basis of the evidence summarised in the Tribunal’s decision, it cannot be said that the Tribunal was wrong to find that the Abernethys had not taken all reasonable steps to mitigate their loss and that their damages should be reduced by a figure less than $16,701.21.

[113] While I accept that it is not satisfactory to be unable to examine the actual amounts involved in the Tribunal’s apportionment for contributory negligence and reduction for failure to mitigate loss, in the circumstances of this case and taking into account the amounts involved in the two exercises I am not prepared to conclude that when taken together the 10 per cent reduction was wrong.

[114] On this ground of their cross-appeal, the Abernethys argue that the Tribunal’s decision to award general damages of $7,500 for Mrs Abernethy and $5,000 for Mr Abernethy was inconsistent with relevant authorities and not justified by the evidence. For Messrs Coughlan and Humphrey, it was argued that the Abernethys had not shown that the Tribunal’s decision was unreasonable or an entirely erroneous estimate of the general damages to which the Abernethys were entitled.

[115] The Tribunal addressed the issue of general damages in the following paragraphs of its decision:

[157] However I do not accept that a figure of $60,000.00, for general damages, $30,000.00 each for Mr Abernethy and Mrs Abernethy, is reasonable.

[158] This is because they have not lived in the house for over four and a half years of the six years since they bought it in September 2003. They occupied the house only for 16 or 17 months until January 2005.

[159] The High Court has given weight to the detrimental effects of occupation on owners of leaky homes. The Abernethys have been spared much of that. They have continued to bear the burden of coping with the

implications of its being a leaky building. This has involved stress, inconvenience and worry.

[160] Accordingly the amount claimed for general damages should be significantly reduced to $7,500.00 for Mrs Abernethy, who has born the major share of the burden, and $5,000.00 for Mr Abernethy. That is consistent with my accepting their claim for $30,225.00 for consequential losses, which is for reduced or lost rental income including lost rent while repairs are being carried out.

[116] There is no dispute that if their claim for damages for their “leaking home” is upheld the Abernethys are entitled to general damages for non-economic loss. The only question is the appropriate amount.

[117] Since the Tribunal’s decision of 26 August 2009 the Court of Appeal has considered the question of the appropriate amount of damages for non-economic loss in “leaky homes” cases in Byron Avenue.67 After considering the relevant principles and a range of other “leaky home” cases, Baragwanath J concluded at [129]:

By a process of similar reasoning I would alter the figure of $12,500 set by the Judge to $15,000 in relation to the non-resident plaintiffs and the single sum where the burden is shared $20,000 to $25,000.

[118] Commenting on the same issue in Byron Avenue William Young P, with whom Arnold J agreed, said:

[152] I consider that this Court has a role in giving general guidance as to appropriate levels of compensation for non-economic loss in leaky homes cases. Rules of thumb would serve to reduce the cost of resolving litigation of this sort, and, as well would facilitate consistency. On the other hand, I agree with Baragwanath J that this is not an ideal case for such general guidance to be given, primary because, as he notes, the material before us was rather too limited for us to be confident that we have a reasonably complete grasp of all the relevant issues.

[153] For the reasons given by Baragwanath J, I support awards for non- economic loss in this case which proceed on the bases that:

(a) Such awards should not made in favour of corporate owners; (b) $15,000 is appropriate per unit for non-occupiers ; and

As Baragwanath J points out, however, not all the claims can be neatly categorised in this way and some evaluative assessment may be required.

[154] This approach involves elements of rough justice. By way of illustration of this proposition, a purchaser with a phlegmatic disposition does as well as one who is more prone to stress and allowances for the length of time the purchasers have lived with the problem are broad-brush at best. On the other hand, there is a limit to the extent to which it is practical to go into fine detail on assessments of this kind.

[119] While the Court of Appeal subsequently clarified that the orders proposed by Baragwanath J for the awards of damages for non-economic loss were the orders of the Court,68 it is clear that the Court was giving “general guidance” and “rules of thumb” for the purpose of reducing litigation costs and facilitating consistency. As Baragwanath J had recognised, an appellate court will interfere with an award of general damages only if satisfied that the award is “wholly erroneous”:

[112] This Court will interfere with an award of general damages only if satisfied that the award is wholly erroneous. That is for two reasons. One is that the trial judge, who has a feel for the case and the witnesses unattainable from reading briefs and transcripts, is better equipped than this Court to appraise their significance and the actual effect of stress resulting from the breach of duty. The other is the imprecision of the value judgment of how that effect can be expressed in money terms. While because of the number of pending claims there would be real benefit from the provision of guidelines to assist settlements, the emphasis of the present case was understandably upon aspects other than general damages. We do not have the evidence nor did we receive the argument needed to provide guidelines. A test case on such matters would focus sharply upon:

(a) the objective nature of the stress-inducing factors, including their character and duration;

(c) in the case of occupants of leaky buildings the factors discussed in the report Do Damp and Mould Matter? Health Impacts of Leaky Homes;

(d) assessment of how such injury and its results compares with that in other general damages awards.

[120] Bearing in mind the general reluctance of an appellate Court to interfere with awards of general damages, the factors mentioned by Baragwanath J and William Young P, and the level of general damages for non-occupiers approved by the Court in Byron Avenue in the circumstances of the cases before the Court, I am not prepared to conclude on appeal in the present case that the Tribunal’s decision to

award the Abernethys, as non-occupiers, general damages of $12,500 was “wholly erroneous” or so outside the range of what was reasonable in the circumstances of this case that it ought to be set aside.

[122] As submitted for the Abernethys, interest will be payable on the amounts in the Tribunal’s decision from the date of that decision: s 95(2)(a) of the Weathertight Homes Resolution Services Act 2006 and White v Rodney District Council.69

[123] As Messrs Coughlan and Humphrey have been unsuccessful on their appeal and the Abernethys have been unsuccessful on their cross-appeal, costs should lie

69 White v Rodney District Council HC Auckland CIV-2009-404-1880, 12 March 2010 at [21]–[24].

High Court of New Zealand Decisions

Coughlan v Abernethy HC Auckland CIV 2009-004-2374 [2010] NZHC 2180 (20 October 2010)